Walgreens to Purchase 45% of Alliance Boots

Posted: June 19, 2012

Walgreen Co. and Alliance Boots GmbH have entered into a strategic transaction designed to bring together the strengths and expertise of both companies to create the first global pharmacy-led, health and well-being enterprise. This transaction will bring together two leading companies with iconic brands, complementary geographic footprints, shared values and a heritage of trusted health care services, through pharmaceutical wholesaling and community pharmacy care, dating back more than 100 years.

an unparalleled portfolio of retail and business brands (Walgreens, Duane Reade, Boots and Alliance Healthcare), as well as increasingly global health and beauty product brands (No7, Botanics and Boots Laboratories);

diversified and robust profit pools across the U.S., Europe and key emerging markets; and

a unique platform for growth in developed and emerging markets.

Walgreens will invest approximately $6.7 billion in cash and stock (comprised of $4 billion in cash and 83.4 million shares) in exchange for a 45% equity ownership stake in Alliance Boots. Walgreens will have the option to proceed to a full combination by acquiring the remaining 55% of Alliance Boots in approximately three years’ time. At the current Walgreens share price and at a $1.55=£1 exchange rate, the second step of the transaction would be valued at approximately $9.5 billion in cash and stock, plus the assumption of Alliance Boots then-outstanding debt. Completion of the initial investment, which is subject to various regulatory approvals, is expected to take place by Sept. 1, 2012.

The boards of Walgreens and Alliance Boots unanimously approved the transaction. Upon the completion of Walgreens initial investment in Alliance Boots, Gregory Wasson, president and CEO of Walgreens; Wade Miquelon, executive vice president and CFO; Thomas Sabatino, executive vice president and general counsel; and Robert Zimmerman, senior vice president and chief strategy officer, will join the Alliance Boots board of directors. In addition, Stefano Pessina, executive chairman of Alliance Boots, and Dominic Murphy, director and member of KKR & Co. L.P., will join the Walgreens board Alliance Santé Participations S.A., of which Pessina is a director and whose ultimate ownership is a family trust, will hold a significant stake in Walgreens, which it intends to hold for the long term. KKR, through its funds, will also be an important shareholder of Walgreens.

Walgreens’ Wasson said of the transaction, “At Walgreens, our mission is to be America’s first choice for health and daily living—helping our customers to live well, stay well and get well. Today’s announcement represents an exciting opportunity to accelerate our five core strategies and advance that mission—in the U.S. and now internationally. We are bringing together the strengths and expertise of each company to create a worldwide health care platform for the future that can provide innovative ways to address global health and wellness challenges.